Correlation Between Chevron Corp and KINETICS SMALL

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Can any of the company-specific risk be diversified away by investing in both Chevron Corp and KINETICS SMALL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chevron Corp and KINETICS SMALL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and KINETICS SMALL CAP, you can compare the effects of market volatilities on Chevron Corp and KINETICS SMALL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chevron Corp with a short position of KINETICS SMALL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and KINETICS SMALL.

Diversification Opportunities for Chevron Corp and KINETICS SMALL

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Chevron and KINETICS is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and KINETICS SMALL CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINETICS SMALL CAP and Chevron Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chevron Corp are associated (or correlated) with KINETICS SMALL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINETICS SMALL CAP has no effect on the direction of Chevron Corp i.e., Chevron Corp and KINETICS SMALL go up and down completely randomly.

Pair Corralation between Chevron Corp and KINETICS SMALL

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.01 times less return on investment than KINETICS SMALL. But when comparing it to its historical volatility, Chevron Corp is 1.1 times less risky than KINETICS SMALL. It trades about 0.1 of its potential returns per unit of risk. KINETICS SMALL CAP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,351  in KINETICS SMALL CAP on September 6, 2022 and sell it today you would earn a total of  7,517  from holding KINETICS SMALL CAP or generate 118.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Chevron Corp  vs.  KINETICS SMALL CAP

 Performance (%) 
       Timeline  
Chevron Corp 
Chevron Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Chevron Price Channel

KINETICS SMALL CAP 
KINETICS Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in KINETICS SMALL CAP are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, KINETICS SMALL showed solid returns over the last few months and may actually be approaching a breakup point.

KINETICS Price Channel

Chevron Corp and KINETICS SMALL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chevron Corp and KINETICS SMALL

The main advantage of trading using opposite Chevron Corp and KINETICS SMALL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, KINETICS SMALL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KINETICS SMALL will offset losses from the drop in KINETICS SMALL's long position.
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The idea behind Chevron Corp and KINETICS SMALL CAP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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